Bank of America 2014 Annual Report Download - page 239

Bank of America 2014 237
Income tax expense (benefit) for 2014, 2013 and 2012 varied from the amount computed by applying the statutory income tax rate
to income before income taxes. A reconciliation of the expected U.S. federal income tax expense, calculated by applying the federal
statutory tax rate of 35 percent, to the Corporation’s actual income tax expense (benefit), and the effective tax rates for 2014, 2013
and 2012 are presented in the table below.
Reconciliation of Income Tax Expense (Benefit)
2014 2013 2012
(Dollars in millions) Amount Percent Amount Percent Amount Percent
Expected U.S. federal income tax expense $ 2,399 35.0 % $ 5,660 35.0 % $ 1,075 35.0 %
Increase (decrease) in taxes resulting from: (0.001)% (0.001)% (0.001)%
State tax expense, net of federal benefit 276 4.0 450 2.8 349 11.4
Affordable housing credits/other credits (950) (13.8) (863) (5.3) (783) (25.5)
Changes in prior period UTBs, including interest (741) (10.8) (255) (1.6) (198) (6.4)
Tax-exempt income, including dividends (533) (7.8) (524) (3.2) (576) (18.8)
Non-U.S. tax rate differential (1) (507) (7.4) (940) (5.8) (1,968) (64.1)
Nondeductible expenses 1,982 28.9 104 0.6 231 7.5
Leveraged lease tax differential 53 0.8 26 0.2 83 2.7
Non-U.S. statutory rate reductions —— 1,133 7.0 788 25.7
Other 43 0.6 (50) (0.4) (117) (3.8)
Total income tax expense (benefit) $ 2,022 29.5 % $ 4,741 29.3 % $ (1,116) (36.3)%
(1) Includes in 2012, a $1.7 billion income tax benefit attributable to the excess of foreign tax credits recognized in the U.S. upon repatriation of the earnings of certain non-U.S. subsidiaries over the
related U.S. tax liability.
The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.
Reconciliation of the Change in Unrecognized Tax Benefits
(Dollars in millions) 2014 2013 2012
Balance, January 1 $ 3,068 $ 3,677 $ 4,203
Increases related to positions taken during the current year 75 98 352
Increases related to positions taken during prior years (1) 519 254 142
Decreases related to positions taken during prior years (1) (973)(508) (711)
Settlements (1,594)(448) (205)
Expiration of statute of limitations (27) (5) (104)
Balance, December 31 $ 1,068 $ 3,068 $ 3,677
(1) The sum per year of positions taken during prior years differs from the $741 million, $255 million and $198 million in the Reconciliation of Income Tax Expense (Benefit) table due to temporary
items, state items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation of Income Tax Expense (Benefit) table.
At December 31, 2014, 2013 and 2012, the balance of the
Corporation’s UTBs which would, if recognized, affect the
Corporation’s effective tax rate was $0.7 billion, $2.5 billion and
$3.1 billion, respectively. Included in the UTB balance are some
items the recognition of which would not affect the effective tax
rate, such as the tax effect of certain temporary differences, the
portion of gross state UTBs that would be offset by the tax benefit
of the associated federal deduction and the portion of gross non-
U.S. UTBs that would be offset by tax reductions in other
jurisdictions.
The Corporation files income tax returns in more than 100 state
and non-U.S. jurisdictions each year. The IRS and other tax
authorities in countries and states in which the Corporation has
significant business operations examine tax returns periodically
(continuously in some jurisdictions). The Tax Examination Status
table summarizes the status of significant examinations (U.S.
federal unless otherwise noted) for the Corporation and various
subsidiaries as of December 31, 2014.
Tax Examination Status
Years under
Examination
Status at
December 31
2014
U.S. (1) 2010 – 2011 IRS Appeals
U.S. 2012 – 2013 Field examination
New York 2008 – 2012 Field examination
U.K. 2012 Field examination
(1) Field examination completed during 2014. The Corporation filed a protest related to certain
adjustments with the IRS administrative appeals division.
During 2014, the Corporation settled and effectively resolved
the federal examinations related to years 2005 through 2009 and
all open Merrill Lynch years through 2008, as well as various state
and local examinations for multiple years.